China's Huadian to tender for shale gas drilling services

BEIJING, March 18 Mon Mar 18, 2013 9:36am EDT

BEIJING, March 18 (Reuters) - State-run utility group China Huadian Corp, one of 16 Chinese companies that won the country's second shale gas auction, plans a tender later this year for engineering and service companies, a company official said on Monday.

China opened its second shale gas auction to non-oil firms, seeking to unlock huge reserves and mirror the experience of the United States where independent drillers have driven a shale boom.

The move has, however, raised concerns over the capacity of the firms picked, as none of them has drilled a single gas well, meaning they will have to buy in expertise.

Huadian, via three of its subsidiary companies, will spend 2.7 billion yuan ($434 million) hunting for the unconventional fuel in four blocks in China's Hubei, Hunan and Guizhou province, the official told an industry seminar.

"We will be looking for professional services from seismic survey to drillings via a tender towards late this year," the official said, adding that it should be open to both domestic and international companies.

Industry experts have said demand for expertise will provide lucrative opportunities to major engineering firms such as Baker Hughes and Halliburton, or smaller Chinese service companies like Anton Oilfield Services Group.

Over the next three years, Huadian plans to drill a total of 24 exploration and appraisal wells, most of which would be vertical drillings as they are cheaper than horizontal ones. If industrial flows are found, an additional 20 horizontal wells will be sunk, the official said.

The utility firm, drawn to the shale business in 2010, is in the middle of forming its specialist oil and gas division to coordinate the group's execution of shale gas activities.

It has hired about 20 professionals from companies including state energy giants PetroChina and Sinopec Corp , the official said.

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